RPR FY2012 No.19 Chapter 7

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    Chapter 7

    Indonesia Country Report

    Cecilya Laksmiwati MalikEnergy Policy Planning Expert (Former Senior Scientist and Researcher of BPPT),

    Indonesia.

    June 2013

    This chapter should be cited as

    Malik, C. L. (2013), Indonesia Country Report in Kimura, S. (ed.),Analysis on

    Energy Saving Potential in East Asia, ERIA Research Project Report 2012-19,

    pp.143-162.ERIA [online]. Available at:

    http:/www.eria.org/RPR_FY2012_No.19_Chapter_7.pdf

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    CHAPTER 7

    Indonesia Country Report

    CECILYA LAKSMIWATI MALIK

    Energy Policy Planning Expert

    (Former Senior Scientist and Researcher of BPPT), Indonesia

    1.BackgroundIndonesia is the largest archipelagic state in Southeast Asia comprising of 17,504

    islands scattered over both sides of the equator. The five largest islands are Java,

    Sumatra, Kalimantan (the Indonesian part of Borneo), New Guinea (shared with

    Papua New Guinea), and Sulawesi. The country shares land borders with Papua

    New Guinea, East Timor and Malaysia. Other neighbouring countries include

    Singapore, the Philippines, Australia, and the Indian territories of Andaman and

    Nicobar Islands.

    Indonesia covers an area of 1,910,931 square kilometres and is the worlds 16th

    largest country in terms of land area. The 2010 population census showed that

    Indonesias population reached 237.6 million people, and it is still the worlds fourth

    most populous country. Its average population density is 124 people per square

    kilometer. The population has continued to increase, reaching 241 million people in

    2011, resulting in a population density of 126 people per square kilometer. By end of2012, the population reached almost 250 million people.

    Economic growth in Indonesia in 2011 was the fastest since before the Asian

    financial crisis as rising investment and domestic spending countered a slowdown in

    export demand due to Europes debt crisis. Real GDP grew at almost 6.5 percent in

    2011 after a revised 6.2 percent gain the previous year (2010). In 2011, Indonesias

    real GDP was US$ 292 billion (constant 2000 US$) and reached. For 2012, the real

    GDP of the country was 311 billion rupiah, increasing at an average ate of 6.2% per

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    2.Modelling AssumptionsIndonesias GDP growth was 6.14 percent in 2010 because of high export

    demand for mining products and non-oil and gas products. In early 2013, the

    Indonesian Bureau of Statistics (BPS) announced that GDP growth will continue to

    increase and is expected to reach 6.7 percent in 2013, higher than 2012 which was

    recorded as 6.2 percent.

    GDP growth is assumed to continue to be 6.7 percent per year until 2015. From

    2015, the National Energy Council assumptions of 8 percent up to 2025 and 7.5

    percent until 2035 have been applied. On the average, the assumed annual growth in

    Indonesias GDP between 2009 and 2035 is around 7.5 percent.Although the prediction of the GDP for Indonesia is around 7 to 7.5 percent per

    year, for the purpose of this study it was assumed that real GDP would grow slower

    at an average annual growth rate of 5.4 percent over the 2010 to 2035 period.

    Population growth is assumed to increase at an average of 1.0 percent per year

    between 2010 and 2035. This is higher than the assumption used in previous study

    (0.9 percent per year) which was based on the assumptions of the National Energy

    Council.With regards to future electricity supply, Indonesia will increase its usage of coal

    as part of the Government Crash Program for power generation. During the First

    Phase of the program an additional 10,000 megawatts (MW) of coal-fired electricity

    capacity will be built by 2014. In addition, the Government is also embarking on the

    Second Phase where additional capacities will be mainly coming from geothermal

    energy and other renewable energy sources. This is in line with the projected

    increasing share of renewable energy in the future electricity supply mix in response

    to the renewable portfolio standard (RPS).

    Supply from gas-fired power plants is also expected to increase. However,

    improvements to gas supply infrastructure are required. In contrast, generation from

    oil-fired power plants is assumed to decline significantly. Last years study assumed

    that nuclear will become part of the future electricity supply mix in Indonesia from

    2018 onwards. This was deferred following the incident at the Fukushima nuclear

    power station in Japan in March 201. As a result of this deferral, nuclear power

    plants are only assumed to be available in the APS after 2020. In this regard, the

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    study will include nuclear after 2020 with 2 units each with a capacity of 1000MW.

    The number of nuclear plants to be built by 2035 was limited to a maximum of 3

    units with a total combined capacity of 3000MW.

    For the energy efficiency scenario, the National Energy Council has yet to issue

    the National Energy Policy 2010-2050. In this regard, the national goal to achieve

    GDP energy elasticity of less than 1 by 2025 has been used as the energy saving

    target for this years study. Like the previous study, specific energy saving targets by

    sector was assumed as shown in Table 7-1.

    Table 7-1: Energy Conservation Potential to 2020

    Sector

    Energy

    Conservation

    Potential (RIKEN)

    (%)

    Energy

    Conservation

    Potential*

    (%)

    Energy

    Conservation

    Potential**

    (%)

    Industry 15-30 31 20

    Transportation 25 34 24Residential/Commercial 10-30 34 16

    Note: * Sectoral target submitted at ECTF in Myanmar in 2009. ** Sectoral target assumed forthe study

    3.Outlook Results3.1 Business as Usual Scenario (BAU)3.1.1. Final Energy Demand

    Indonesias final energy demand increased at an average annual rate of 4.4

    percent between 1990 and 2010 period, increasing from 45 Mtoe to 108 Mtoe.

    Given the assumed economic and population growth, the growth in the final energy

    consumption will continue but at a faster rate of 5.3 percent per year between 2010

    and 2035 in the BAU scenario.

    This growth stems from the rapid increase of the energy consumed in the

    transportation sector, which is still heavily dependent on oil. In the past, the final

    energy demand of the transport sector grew at an average rate of 6.1 percent per year

    over the 1990-2010 period. In fact the transport sector experienced the highest

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    growth as compared to the other sectors. It is expected that this growth will continue

    up to 2035, but at a slower rate of 5.6 percent per year for the BAU scenario.

    Final energy consumption in the industrial and other sectors (mainly consisting

    of the residential and commercial), grew at an average rate of 5.2 percent and 3.3

    percent per year, respectively over the 1990-2010 period. The final energy demand

    of these sectors for the period 2010-2035 are projected to increase more rapidly

    under the BAU scenario, at an average annual growth rate of 5.4 percent and 5.0

    percent, respectively.

    Figure 7-1: Final Energy Demand by Sector

    0

    50

    100

    150

    200

    250

    300

    350

    400

    450

    1990 2010 2035

    Milliontonsofoilequivalent

    Industry Transport Others Non-Energy

    0%

    20%

    40%

    60%

    80%

    100%

    2009 2010 2035

    Industry Transport Others Non-Energy The industrial sector had the highest share in the total final energy demand over

    the past decade (1990-2010). The share increased from 37 percent in 1990 to around

    42 percent in 2010. For the future, the share of the industrial sector in the total final

    energy demand will increase to 43 percent in 2035. The rapid increase of the various

    alternative fuels demand will contribute to the increase of the sectors share in the

    total final energy demand mix.

    The transport sector share in the total final energy demand had also increase

    from 22 percent in 1990 to 33 percent in 2010. This share will continue to increase,

    reaching 36 percent in 2035. The combined share of oil and alternative fuels for

    transport contributed more to the increase of the transports share in the total final

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    energy demand. Oil comprised majority of fuels in the transport sector while

    alternative fuels for transport grows rapidly at a rate of 6.6 percent for the period

    2010-2035.

    The remaining sectors share in the total final energy demand declined from 39

    percent in 1990 to 24 percent in 2010. These sectors share are expected to continue

    declining to 21 percent by 2035 as a result of a slower growth in the total energy

    demand as compared to the industrial and transport sector.

    By fuel type, coal experienced the fastest growth over the 1990-2010 period, at

    an average rate of 16.5 percent per year. This rapid growth of coal demand was due

    to its significant increase in the industrial sector, from 0.6 Mtoe in 1990 to almost 13

    Mtoe in 2010. Electricity is also increasing significantly over the same period as

    industry expands and more households were electrified. Electrification rate has

    improved from 28 percent in 1990 to 66.5 percent in 2010. Total electricity

    demand increased from 2.3 Mtoe to 13 Mtoe, growing at an average rate of 8.9 per

    year.

    As for natural gas and oil, the average annual growth of these fuels over the

    1990-2010 period were similar at around 4 percent while other fuels demand (mostly

    biomass for industries and charcoal for households) remained the same, at around 6

    Mtoe. In households, biomass is mainly used as a non-commercial fuel so not

    included in the current projection.

    In the future, the demand of all fuels will continue to increase. For coal, the

    demand will increase at a much slower rate than the past. It is expected that coal

    demand will increase at an average rate of 6.2 percent per year, from 13 Mtoe in

    2010 to around 58 Mtoe in 2035. Electricity is also expected to grow but at a slower

    rate than the past. The average annual growth rate for electricity demand is similar tothat of coal, i.e 6.2 percent per year over the 2010-2035 period.

    Natural gas and oil demand will grow at an average rate of 5.5 percent per year

    and 4.7 percent per year between 2010 and 2035. Other fuels demand will increase

    the fastest over the same period, at an average growth rate of 6.6 percent per annum.

    This is mainly due to the introduction of biofuels both in the transport sectors and the

    industries.

    In terms of fuel, oil still plays a major role in the countrys final energy demand.

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    The relative importance of oil, however, has been declining with its share falling

    from 63 percent in 1990 to 56 percent in 2010. This decline in the share of oil in the

    total final energy demand is projected to continue as more alternatives fuels are being

    consumed by the end-use sectors. It is expected that this share will decline to around

    47 percent in 2035.

    Figure 7-2: Final Energy Demand by Fuel, BAU

    0

    50

    100

    150

    200

    250

    300

    350

    400

    450

    1990 2010 2035

    Milliontonsofoilequiva

    lent

    Coal Oil Natural GasElectricity Heat Others

    0%

    20%

    40%

    60%

    80%

    100%

    1990 2010 2035

    Coal Oil Natural GasElectricity Heat Others

    3.1.2. Primary Energy ConsumptionPrimary energy consumption in Indonesia grew faster than the final energy

    demand at about 5.2 percent per year from 58 Mtoe in 1990 to 159 Mtoe in 2010.

    Among the major energy sources, the fastest growing fuels between 1990 and 2010

    were coal and geothermal energy. Geothermal energy consumption grew at anaverage annual rate of 11.6 percent while coal grew at 10.8 percent a year. Oil

    consumption increased at a slower rate of 3.8 percent per year while natural gas

    consumption grew slightly faster at 3.9 percent per year. Despite the relatively slow

    growth in natural gas consumption, it still accounts for a relatively large proportion

    of primary energy consumption.

    In the BAU scenario, Indonesias primary energy consumption is projected to

    increase at an average annual rate of 5 percent reaching 530 Mtoe in 2035. Coal is

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    projected to continue growing but at a slower rate of 6.4 percent per year over the

    projection period. Geothermal energy is also expected to increase over the projection

    period, but will be slower than the growth witnessed over the past two decades

    because of the difficulties expanding exploration in protected forest areas. In

    addition, exploration will also become more expensive as the areas to be explored

    become smaller and are increasingly located in difficult terrains such as those in the

    eastern part of Indonesia. The growth rate of geothermal energy consumption until

    2035 is projected to be 6.3 percent per year.

    Hydro, on the other hand, will increase at a faster rate of 6.8 percent per year

    between 2010 and 2035 compared with 1990-2010 periods. This is because more

    hydro plants will be built in the future such as in East Kalimantan. Consideration is

    being given to building more run-of river type hydro rather than reservoir type. The

    average annual growth rate of hydro will be 6.8 percent per year between 2010 and

    2035.

    Oil consumption is projected to increase at an average annual rate of 4.0 percent

    over the projection period. Natural gas consumption is expected to increase faster

    than oil at an average rate of 4.2 percent per year.

    There is assumed to be no uptake of nuclear in the BAU scenario. Thus, other

    renewable energy will have a significant role in the future primary energy supply mix

    as the uptake of cleaner alternatives to oil increases. The rate of increase of other

    renewable resources such as solar, wind and biomass will be faster than the other

    fuels at an average annual rate of 7.4 percent

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    Figure 7-3: Primary Energy Consumption, BAU

    0

    100

    200

    300

    400

    500

    600

    1990 2010 2035

    Milliontonsofoilequivalent

    Coal Oil Natural Gas Nuclear

    Hydro Geothermal Others

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    1990 2010 2035

    Coal Oil Natural Gas NuclearHydro Geothermal Others

    Oil constituted the largest share of total primary energy consumption but

    declining from 59 percent in 1990 to 46 percent in 2010. The share of natural gas in

    the total mix also declined from 32 percent in 1990 to 25 percent in 2010. The

    declined in the shares of oil and gas indicated that its growth over the 1990-2010

    period was slower than the other fuels.

    Since both coal and geothermal experienced the rapid growth over the 1990-

    2010 period, its share in the total fuel mix has increased significantly. Coal shares in

    the total primary energy mix increased from around 7 percent to 19 percent while

    geothermal the shares increased from 1.5 percent to around 5 percent. Other

    renewables shares, except hydro, also increased from virtually zero in 1990 to 4

    percent in 2010. Hydros share remains slightly constant.

    In the BAU scenario, oils share will still be dominant throughout the 2010-2035

    period and with a continously declining share. The share of oil in the total primary

    energy mix will be around 37 percent in 2035. Similarly, natural gas share will

    continue to decline over the projection period reaching 21 percent in 2035.

    Hydros share in the total primary energy mix will still be below 2 percent even

    though hydro grows faster than geothermal.

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    3.1.3. Power GenerationPower generation output increased at an average rate of 8.5 percent per year over

    the past two decades, from 33 TWh in 1990 to almost 170 TWh in 2010. The fastest

    growth occurred in the production of electricity from natural gas plants at almost 22

    percent per year. This is due to the increase in gas turbine and combine cycle

    capacities as natural gas became increasingly available

    In the BAU scenario, to meet the demand of electricity, power generation is

    projected to increase at a slower rate of 6 percent per year reaching 733 TWh in 2035.

    By type of fuel, generation from Others will have the fastest growth at an average

    rate of almost 26 percent per years. The main reason for this very rapid growth is

    that generation from these other sources was very small in 2010 but is expected to

    increase significantly as a result of the Governments policy to increase the use of

    new and renewable energy sources including solar PV, wind, oean energy, etc. which

    are classified as Others

    Generation from geothermal and hydro are also growing fast, but much slower

    than Others, at 6.8 percent per year and 8 percent per year, respectively.

    Power generation from natural gas will continue to increase but at a much slower

    rate of 6.7 percent per year while coal thermal power generation will be growing at

    an average annual rate of 6.2 percent. No nuclear plant is considered under the BAU

    scenario.

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    Figure 7-4: Power Generation by Type of Fuel (TWh)

    0

    100

    200

    300

    400

    500

    600

    700

    800

    1990 2010 2035

    TWh

    Coal Oil Natural Gas Nuclear Hydro Geothermal Others

    0%

    20%

    40%

    60%

    80%

    100%

    1990 2010 2035

    Coal Oil Natural Gas Nuclear Hydro Geothermal Others

    The share of coal remains dominant in the total power generation of the country.

    The share of coal in total power generation increased from 31.5 percent in 1990 to

    40.1 percent in 2010. It is expected under the BAU scenario, this share will continue

    to increase.2035, the share of coal in the total power generation will be 42 percent.

    Oil had the largest share in power generation which was 42.6 percent in 1990.

    By 2010, the share of oil declined to 19.9 percent as natural gas production increased

    rapidly. Natural gas share in 2010 reached 24.1 percent and is expected to increase

    to 28.4 percent by 3035 under the BAU scenario,

    Hydro had also an important role in the total electricity production of the country.

    Its share in 1990 reached 20.1 percent. But in 2010, the share declined to 10.4

    percent. It is expected under the BAU scenario, hydro share will experience slightgrowth to 12.5 percent in 2035.

    Geothermal and other renewables share will constitute in total about 5.6 percent of

    the power generation.in 2010. It is expected that the role of these renewables will

    increase significantly in the future and thus, the share will increase to 12.2 in total

    by 2035.

    The average thermal efficiency of fossil power plant was around 32.3 percent in

    1990 and improved to 33.1 percent in 2010. In the BAU scenario, thermal efficiency

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    of fosssil plants is expected to remain at around 33 percent in 2035.

    By fuel, coal power plants thermal efficiency will be around 32 percent in 2035

    while oil will remain at 33 percent and natural gas at 36 percent.

    Figure 7-5: Thermal Efficiency, BAU

    0

    5

    10

    15

    20

    25

    30

    35

    40

    1990 2010 2035

    Percent

    Coal Oil Gas

    3.1.4. Energy IndicatorsAs a developing country, Indonesias primary energy intensity (TPES/GDP) has

    been increasing until up to 2000. Since then, the intensity declined and reached a

    level of 577 toe/million 2000 USD in 2010. This is an indication that energy

    producers and consumers has started to effectively use energy through the

    implemetation of energy conservation measures and greater utilization of efficient

    energy technologies.In the BAU scenario, the primary energy intensity is projected to decline at an

    average annual rate of 0.4 percent over the 2010 to 2035 period. The primary energy

    intensity of 2035 will be around 516 toe/million 2000 USD. Thus, the energy

    intensity ratio is expected to improve by almost 11 percent in 2035 as compared to

    2010.

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    Figure 7-6: Energy Intensity and Energy per Capita

    100

    200

    300

    400

    500

    600

    700

    1990 2010 2035

    toe/millionconstant2000US$

    -

    0.2

    0.4

    0.6

    0.8

    1.0

    1.2

    1.4

    1.6

    1.8

    2.0

    toeperperson

    Energy Intensity (left axis)

    Energy per Capita (right axis)

    0.80

    0.85

    0.90

    0.95

    1.00

    1.05

    1.10

    1.15

    1990-2010 2010-2035

    The per capita energy consumption, measured as the ratio of total primary energy

    consumption to the total population, has been increasing since 1990 from 0.33 to

    0.67 in 2010. This level of energy consumption per capita is an indication that

    energy access of the society is still low which can be reflected by the ratio. The

    current electrification ratio is around 66.5 percent, indicating that there is still 33.5

    percent of households in the country that have no access to electricity. The main

    reason is that there is a lack of energy infrastructure development particularly in the

    remote area and the outer islands due to the high investment cost.

    Under the BAU scenario, the energy consumption per capita will continue to

    increase and will reach 1.76 toe per person in 2035. This result is in accordance with

    the existing national energy policy (2006) which targeted a level of 1.4 TOE in 2025.

    In the BAU scenario, the elasticity of final energy consumption is expected to

    continue declining and will reach 0.9 in 2035. Elasticity below 1.0 is an indicator

    that growth in final energy consumption will be slower than growth in GDP over the

    period 2010-2035.

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    3.2. Energy Saving and CO2Reduction Potential3.2.1. Final Energy Demand

    In the APS, final energy demand is projected to increase at a slower rate than in

    the BAU scenario, increasing at an average rate of 4.4 percent per year from 108

    Mtoe in 2010 to 314 Mtoe in 2035. Slower growth under the APS, relative to the

    BAU scenario, is projected across all sectors as a result of the government program

    for energy efficiency and conservation, particularly in the transport sector. The

    growth rate of energy demand in the transport sector is projected to increase by 4.3

    percent per year compared with 5.6 percent per year in the BAU. Figure 7-7 shows

    the final energy demand by sector in 2010 and 2035 in both the BAU and APS.

    Figure 7-7: Final energy Demand by Sector, BAU and APS

    0

    20

    40

    6080

    100

    120

    140

    160

    180

    BAU APS BAU APS BAU APS BAU APS

    '10 '35 '10 '35 '10 '35 '10 '35

    Industry Transport Others NonEnergy

    MillionTons

    ofOilEquivalent

    18.4%

    27.3%

    16.2%

    0.0%

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    3.2.2. Primary Energy ConsumptionIn the APS, primary energy consumtion is projected to increase at a slower rate,

    relative to the BAU scenario, 3.7 percent per year to almost 390 Mtoe in 2035. All

    energy sources are projected to experience positive average annual growth rates.

    However, these will be slower than in the BAU scenario. The lower consumption

    relative to the BAU scenario reflects energy efficiency and conservation measures on

    the demand side.

    In terms of final energy consumption savings, there is estimated to be a saving of

    almost 31 Mtoe in the industry sector, almost 40 Mtoe in the transport sector and

    around 10.2 Mtoe in the residential/commercial (other) sector by 2035 under the APS,

    relative to the BAU scenario.

    Figure 7-8: Primary Energy Demand by Source, BAU and APS

    0

    50

    100

    150

    200

    250

    BAU APS BAU APS BAU APS BAU APS

    '10 '30 '10 '30 '10 '30 '10 '30

    Coal Oil Gas Others

    MillionTonsofO

    ilEquivalent

    22.4%

    39.6%

    12.5%28.3%

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    3.2.3. Projected Energy SavingsThe energy savings (the difference between primary energy demand in the BAU

    scenario and the APS) that could be achieved through the energy efficiency and

    conservation goals and action plans of Indonesia are almost 141.4 Mtoe in 2035.

    This is lower than Indonesias energy consumption in 2010 of around 159 Mtoe.

    Figure 7-9: Total Primary Energy Demand, BAU and APS

    0

    100

    200

    300

    400

    500

    600

    BAU APS

    1990 2010 2035

    MillionTonsofOilEquiv

    alent

    141.4Mtoe,26.7%

    3.2.4. Energy IntensitiesAchieving the Government target of one percent per year reduction in energy

    intensity will require extensive implementation of the energy efficiency and

    conservation programs. Adaptation of the sectoral EEC targets under the Alternative

    Policy Scenario (APS) will result in a faster declining rate for the primary energy

    intensity; 1.8 percent per year over the projection period.

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    Figure 7-10: Energy Intensity, BAU and APS

    0

    100

    200

    300

    400

    500

    600

    700

    800

    1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

    toe/millionconstant200US$

    BAU APS

    3.2.5. CO2Emissions from Energy ConsumptionCO2emissions from energy consumption are projected to increase at an average

    annual rate of 5.3 percent from around 100 Mt-C in 2010 to 362 Mt-C in 2035 in the

    BAU scenario. This is driven by the increasing use of carbon intensive fuels,

    particularly the use of coal for power generation and industry, as well as oil in the

    transport sector.

    In the APS, the annual average growth in CO2emissions from 2010 to 2035 is

    expected to be 32 percent lower than in the BAU scenario, increasing at 3.7 percent

    yearly. This lower growth rate is the result of an expected significant decline in coal

    consumption in the power sector in the APS, relative to the BAU scenario. The

    growth in emissions is projected to be slower than the growth in primary energy,

    indicating that the energy saving goals and action plans of Indonesia will be effective

    in reducing CO2 emissions. The Government has committed to reduce CO2

    emissions in 2025 by 26 percent without international assistance and 41 percent with

    international assistance. This study result is above the committed target of 26

    percent. Thus, more stringent energy saving and renewable targets need to be in

    place to achieve the committed CO2reduction targets of 41 percent.

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    Figure 7-11: CO2Emissions from Energy Combustion, BAU and APS

    0

    50

    100

    150

    200

    250

    300

    350

    400

    BAU APS

    1990 2010 2035

    MillionTonsofCarbon

    116.1MtC,32.1%

    3. Implications and Policy RecommendationsIndonesias primary energy intensity (TPES/GDP) has been declining since 2000

    as a result of greater utilization of efficient energy technologies both by energy

    producers and consumers. Under the BAU scenario, the intensity declined lower than

    the target in the National Energy Policy of 2006 of one percent per year. Adapting

    the sectoral target under the APS will enable the countrys projected target to decline

    even more at 1.8 percent per year. The elasticity of final energy consumption is also

    projected to decrease to below 1.0 only if the sectoral saving target is implemented

    fully as indicated in the APS scenario.

    The primary energy consumption per capita is still below the neighboring

    countries like Thailand and Malaysia both under the BAU and APS scenario. Thus,

    there are still people without access to energy as indicated by the electrification ratio

    of 66.5 percent in 2010. Development of energy infrastructure particularly in the

    remote and small island areas will improve the electrification ratio, hence increase

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    development, etc. Nonetheless, further measures still need to be undertaken which

    can be attractive to increase private sector involvement such as improving the

    transparency and awareness of government support mechanisms; enhancing financial

    institution to participate in renewable energy projects, etc.